When Paul Pomroy took the reins of the UK and northern European finance function for McDonald’s last November, little did he know that the horsemeat scandal would be sweeping the continent within weeks.
Given that he’d just assumed responsibility for the group’s supply chain, he was on high alert as soon as it emerged that British supermarket chains had been selling contaminated products.
The fast-food retailer, which has been operating in the UK for 40 years, was given a clean bill of health – testimony to the rigour the company applies to managing its supply chain and no mean feat for a business that serves four million meals a day in the UK alone.
Its advanced approach to logistics is part of a continual cycle of innovation and development that the group has established to keep pace with consumers’ increasing awareness and maturing tastes.
Pomroy, who’s worked at the company for 17 years, has been involved in many of those adaptations. Joining from accountancy firm Smith & Williamson, where he was an insolvency specialist, Pomroy started in McDonald’s UK’s corporate finance department in 1996 as a real-estate analyst.
The group was growing fast at the time, opening about 100 outlets every year. But it was a move to the business strategy team as a senior accountant in 2002 that catapulted him to the front line of innovation.
“The department was set up as the company looked to become more analytical in our food strategy. This gave me a really broad insight into how the company operated,” he says.
“It was a new, proactive approach for the business, investing in an in-house department that was geared to analyse performance and to help shape and monitor the success of the business’s long-term strategy.”
The introduction of salads in 2004 and the Deli Choices range of sandwiches and wraps in 2005, acting on consumers’ enthusiasm for a healthier diet, were pioneering successes for the division.
Then came freshly ground coffee – an acknowledgment of increasing competition from operators such as Starbucks and Caffe Nero.
For Pomroy such new offerings represented the considerable amount of work that the business strategy team had done in interpreting changes in the market.
“We understand that we need to listen to what our customers want, so everything we do is about moving in a direction and at a pace that suits their lifestyles,” he says. “But we also understand that at each time of day, stage of the week or point in the year there will be different needs and preferences, so we continually run our portfolio based on consumer insight.”
In a global business that means acknowledging the diversity of tastes around the world. The group’s four-day annual convention in Orlando, Florida, brings together teams from all of its territories to compare notes.
Although its Big Mac, McChicken Sandwich and fries are still core products in most markets, there is flexibility in the system to suit different regions, whether that’s the McAloo Tikki in India or Le Croque McDo in France and Belgium.
In 2005 the UK business decided to improve the image of its outlets by giving them a more upmarket look.
“Cash flow was at its lowest level and we hadn’t reinvested in the estate because our focus had been on growth, so we had taken our foot off the pedal when it came to the look and feel of our restaurants,” Pomroy admits.
“That had left us out of touch with our customers.” The revamp went ahead the following year, featuring “radical changes to the colour scheme, furniture, lighting and layout of our restaurants. In 2007 we also introduced free Wi-Fi, which was another reaction to changing demand,” he says.
Part of the complexity of introducing so many changes has been that, of the 1,200 McDonald’s outlets in the UK, more than 800 are owned and run by franchisees. These 160 entrepreneurs each run an average of five restaurants, although some have significantly more.
“Through our franchised structure we have multiple enterprises running at the heart of the public-facing McDonald’s business. Supporting these operations with bespoke advice is as much of my job as the top-level financial management of McDonald’s UK,” Pomroy says.
“Our franchisees are vital stakeholders. They all champion our values and we involve them heavily in the planning process. So we now have a situation where 50 or so franchisee representatives are involved in discussions concerning areas such as prices and products.”
Because many of the franchisees have backgrounds in other industries, McDonald’s, which still owns all the real estate, is keen to give them as much guidance as possible.
“All franchisees go through a rigorous recruitment process and extremely comprehensive training, where they are advised on how to manage their operations. Access to financial guidance is continuous. The main lenders – Barclays, RBS and HSBC – are invited to exhibit at our annual general meetings so that franchisees can consult them on any issues,” says Pomroy, who adds that an important part of his job is to present “worthwhile investment cases and strategic business moves to the franchisee network”.
In 2008, Pomroy was made vice-president, finance, with his remit extending to pricing, profitability and financial projections. At this time his team adopted several innovations, including the installation of an Oracle database, the introduction of automated P&L for every market and the extensive use of intuitive software.
“We have a big-data warehouse and have numerous inputs – including the results of about 3,000 interviews conducted with customers each month,” he says.
The use of such tools has been vital in making the most of the large volume of information that’s become available to the company, according to Pomroy.
“There’s no doubt that the smart use of research and customer insight forms a huge part of our strategy. Our central business strategy and insight unit plays an integral role in generating and evaluating both qualitative and quantitative insight that’s used to help inform, update, evolve and future-proof the business.”
He adds: “We don’t work simplistically with one piece of software that wraps together every piece of insight we’re gathering and produces one output a day. We take a much more bespoke and segmented approach. Instead of pumping the entirety of our data into one black-box generator and working from one supposedly comprehensive output metric, we continually review, and draw insight from, all of the different strands of research we conduct. The business strategy and insight unit, the department heads, the project leadership groups and the executive team pull together this wealth of insight in a way that lends best to their particular areas of development.”
With so much information to hand, Pomroy and his team were able to create KPIs for each department in areas such as strategic direction, sales, service quality and environmental performance.
“We drove efficiencies across the business, even in the recycling and conversion of used cooking oil to biodiesel to fuel our delivery fleet,” he says.
Pomroy’s current job has added responsibility for the company’s development division, which encompasses property, construction and support services, and for the northern division management team.
But supply management remains his main priority, given the problems that food manufacturers, supermarket chains and other restaurant groups have faced in recent months.
For McDonald’s the avoidance of such problems has largely been down to its efforts to build good relationships with suppliers, according to Pomroy.
“We have an investment plan for working with the 17,500 British and Irish farmers who form the 80 per cent of our supply chain that sits in the UK and Ireland. Our Farm Forward programme, which we launched in 2012, is another demonstration of our long-term commitment to British and Irish farming, where we look to champion high-quality ingredients, share best practice, drive improvements in animal welfare standards and inspire people to enter the exciting agricultural industry.”
Returns of the Mac
McDonald’s UK is proud of its long-term partnerships with its suppliers, he adds. “This certainty is what allows them to invest and grow their businesses as we grow ours. Our strong and sustained sales growth in the UK means we spend more than £360m a year on our supply chain here – £40m more than we spent in 2011.” In the context of the horsemeat scandal, the company’s reputation for managing its supply chain can only have been enhanced, Pomroy argues.
“We believe that food quality begins at the very first stage of the supply chain. All of our raw ingredients meet the highest possible standards of quality and safety. We use 100 per cent British and Irish beef in our burgers – no fillers, trimmings or additives – and traceability is important to us, just as we know it’s important to our customers. We are able to track which farm and which herd a certain batch is from. It’s the simplicity of our products and supply chain, paired with the long-term nature of our partnerships, that play a massive part in this.”
Given the fact that members of the public are increasingly prepared to use social media to broadcast their views on issues such as the horsemeat scandal, the company has invested heavily in developing online platforms, such as the “What makes McDonald’s” microsite, that allow consumers to communicate directly with the company.
“There are lots of challenges that only get bigger if we don’t keep pace with the customer who is savvy with social media,” Pomroy says.
“We want to be able to hear consumers’ questions and comments, tell them our story and give them all the information we have readily available.”
The horsemeat scandal has not been the only corporate issue to have prompted large numbers of consumers to vent their anger online recently. Google, Starbucks and Amazon, for instance, have attracted disdain from those who feel that they haven’t paid enough UK corporation tax, despite generating huge profits in Britain.
Pomroy stresses that McDonald’s is acutely aware of the debate – and pays its fair share.
“We paid over £42m in corporation tax in 2011 and a significant amount of additional tax is paid by our franchisees,” he says.
Looking ahead, he believes that the UK’s continuing austerity measures are bound to affect consumer spending. He acknowledges that consumers are bound to be worried about whether their earnings will keep pace with the increase in living costs – and that McDonald’s needs to keep thinking about such issues when forming its strategy.
“Our challenge is to ensure that we don’t run too fast,” Pomroy says. “We need to be aware of what the customers are willing to spend and to deliver the same high quality they have come to expect. They want to feel assured about what they’re getting.
Photo: Matthew Stylianou
A meaty role
[McDonald’s by numbers]
In 2012 the company’s revenues were up 2 per cent on the previous year, enabling it to post a profit of $5.50bn
1.8 million people are employed in its restaurants, 80 per cent of which are run by franchisees
the group has opened
The business serves
people a day on average in
- Business ethics 
- Career talk 
- Corporate finance 
- Law and regulation 
- Management accounting 
- Networking and social 
- Professional development 
- Reporting and Governance 
- Risk management 
- Strategic management-economics 
- Studying CIMA 
- Sustainability 
- Technology 
- Studying Exam E1 
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- Studying Exam F1 
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